European Stability Mechanism 2012

The European economy has gone through unprecedented turmoil in recent years necessitating the institution of a permanent rescue fund for the euro area and that was the purpose of the European Stability Mechanism, which took over from the European Financial Stability Facility.

The work that this Government is doing aims to take the country back from the economic brink, which is where we found ourselves on taking office and every decision that this Government makes is based on the need to create a stable social, economic and financial framework for the country.

Ratifying the European Stability Mechanism was a common sense step in terms of underpinning the Euro and by putting proper oversight structures in place we can ensure that the difficulties experienced across Europe in 2010 are not repeated.

In June of this year, the euro area member states reached preliminary agreement on a framework for the ESM Direct Recapitalisation Instrument and this legislation provides for the creation of subsidiary bodies which could be used to implement this DRI.

A key change in terms of the Direct Recapitalisation Instrument is that whereas the ESM aimed to provide loans to member states, the DRI can provide loans to financial institutions. The Attorney General has directed that the changes in relation to the DRI mean that the ESM Act approved by the Dáil in 2012 requires amendment and that is what this Bill sets out to achieve.

The accession of Latvia is also covered in the newer version of the Bill, as it updates the capital contribution amounts to take account of the Latvian contribution, even though this does not affect Ireland’s capital contribution.

I would like to take this opportunity to commend Finance Minister Michael Noonan and his officials on the work that they have put into this matter over many months. I note that this legislation needs to be enacted by the end of October to meet the proposed schedule whereby the ESM Board of Governors is expected to take its decision in early November.

I know that huge efforts have been made by Minister Noonan and a large number of officials to achieve direct and retroactive capitalisation. Much of this work is done behind closed doors and with no fanfare, but it is this very necessary and detailed work which could yet take Ireland one step further back from the financial abyss which faced us just a few years ago.

Decisions that this Government have taken to date are paying dividends, but few actions have the potential to save the country as much money as retrospective direct recapitalisation of the Irish banks would, were it possible to achieve it.

Many small steps have been taken to date to get us to this stage and I know that many more careful and considered steps are needed at European level before Ireland can even apply for retrospective recapitalisation, but given the benefits which could yet accrue to the nation’s finances, it is imperative that we as legislators do everything possible to help Minister Noonan and his officials in their endeavours.

The cost of recapitalising Ireland’s banks makes up one fifth of our gross debt, so maximising our return on that recapitalisation is imperative. This Bill sets up an instrument by which the Government can take further steps, if and when it deems those steps prudent, to divest itself of the taxpayer’s share of AIB, Bank of Ireland and PTSB in return for capital from the European Stability Mechanism.

While other pieces of legislation that will come before the House in coming months will generate more headlines, few have the potential impact of this Amendment Bill. I fully support the route being pursued by Minister Noonan and his officials and am delighted to have the opportunity to support this Bill, which is a key piece in what is a large and complex jigsaw with the aim of achieving direct recapitalisation for Irish banks.